1987 & Skew debate

Discussion in 'Options' started by The_Krakenite, Apr 25, 2021.

  1. Robert Morse

    Robert Morse Sponsor

    Yes-not by choice, In most markets back them customers only bought options. We could decide at what price and how many before we moved out markets.
     
    #11     Apr 26, 2021
  2. So you are around 60 by now? You should definitely chime in the thread with the kid looking for advise what to do after college graduation and share your wisdom how being in the market is NOT a good idea for his life. I think he could benefit from your wisdom.

     
    #12     Apr 26, 2021
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  3. Robert Morse

    Robert Morse Sponsor

    Correct-60 Years old. I started in the business while at NYU in'81. Starting trading at 24.

     
    #13     Apr 26, 2021
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  4. Quiet1

    Quiet1

    I've seen this lack of skew mentioned before. A little googling reminded where I saw it last: see p 227 of the 2004 edition of My Life as a Quant by Derman.

    skew.png
     
    #14     Apr 26, 2021
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  5. Matt_ORATS

    Matt_ORATS Sponsor

    And today thanks to the Robinhood type traders, we see a skew in the right tail. Below is a graph of 5 delta IV divided by 75 delta 30 day IV for the components of the S&P, we denote SPY_C in our wheel.orats.com online platform:

    [​IMG]
    https://gyazo.com/608d1eaa78dc96fbd9cf7ed7fcd6ed6f
     
    #15     Apr 29, 2021
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  6. Cabin111

    Cabin111

    [​IMG]

    In "87" I could do a covered call on a boring stock. I would then take that money and put into a money market account earning maybe 5-8%. I wasn't too worried about that crash if I recall. If rates rise again, that "might" be a way to generate extra income...
     
    #16     Apr 29, 2021
  7. Atikon

    Atikon

    why do you think that is/what do you see? Because retail is trying to bet on convexity or because they sell near atm and buy 5 delta?
     
    #17     Apr 29, 2021
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  8. Matt_ORATS

    Matt_ORATS Sponsor

    I think it is basic. They want to participate in the bull market on these names. They buy calls at low prices. Gamification.
     
    #18     May 5, 2021
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